Traditional banks and financial intermediaries are struggling with technology-savvy competitors who are continuously grabbing market share. On the one hand, they are much more willing to take risks and are not afraid of entering new technologies such as blockchain. On the other hand, they are adapting more quickly to a new generation of investors. 21finance CEO Max J. Heinzle is certain: With the right strategy, banks and financial intermediaries can reverse this trend.
Frankfurt (DE), April 25, 2022. Neo-banks and brokers have boomed in recent years. According to a survey by the German IFO Institute, the assets under management (AuM) of investment and banking FinTechs in Germany grew by 265 percent annually between 2013 and 2019. A study by the German Federal Ministry of Finance, continued by economists from the universities of Regensburg and Bremen, even attests to annual growth of 120 percent for the FinTech market from 2015 to 2019.
“Digital natives” are the new target group
These developments pose a challenge to financial institutions and intermediaries, as they are losing market share as a result. This is because the clientele and thus the needs are also changing: “Today, we are facing a new generation of investors. They are young and tech-savvy and their needs have changed. Today’s investors, especially Generation Y, appreciate fast, simple solutions and digital availability of their applications – around the clock” explains Max J. Heinzle, CEO of FinTech 21finance. With its “Marketplace as a Service” (MaaS) software solution, the company offers banks and financial intermediaries the opportunity to create their own digital marketplace and distribute their products through it. An international analysis by management consultants Oliver Wyman proves him right. According to this analysis, neobank customers are young, high-income, urban, and digitally active. For example, 60 percent of the clientele are under 36 years old, 38 percent earn more than 40,000 euros per year, and almost half live in cities. This customer group also needs to be tapped by traditional banks.
Digital assets need digital service
Keyword digital: For Heinzle, this is precisely the advantage that neo-banks use for themselves: “The demands that customers place on their financial institutions are being driven more strongly by new technologies and are changing rapidly. This requires an equally rapid response on the part of providers,” says Heinzle. More and more customers, for example, demand new services such as access to cryptocurrencies or blockchain-based products in addition to traditional banking services.
Legal certainty is already in place
While traditional banks are currently taking a wait-and-see approach, especially when it comes to blockchain technology, FinTechs are much more willing to take risks and have been able to secure important market shares in the recent past as a result. The wait-and-see strategy could prove to be a mistake: “Now is the right time for banks to get to grips with the topic and set the initial course. Those who only start to introduce blockchain solutions when the hype in the industry has gained full momentum run the risk of being too late and lagging behind their competitors,” says Heinzle.
Heinzle does not accept the argument that the lack of a legal framework is the reason why banks are putting on the brakes here: “Many banks are acting reactively because they have security concerns, as the legal framework has not yet been created in some areas of tokenization and, going further, in the area of blockchain-based capital market structures. But more and more legislators are catching up and creating that security. So there is no reason to wait anymore.” And if Heinzle has his way, traditional banks definitely have a good chance of prevailing in competition with the innovative newcomers. “The important thing is that financial institutions act quickly now and either cooperate with FinTechs or set up their own platforms,” advises the 21finance CEO. Customers who have already migrated to new banks could also be persuaded to return in this way. “A recent example is Commerzbank, which wants to offer crypto services in the future and recently applied for a license for this,” says Heinzle.
Crypto hype does not tolerate a wait-and-see approach
Therefore, classic banks should view new technologies as an opportunity. 21finance’s software solution could be such an opportunity: “A B2B product like MaaS enables banks and financial intermediaries to quickly and profitably enter the digital direct sales of financial products. In addition to traditional financial products, it is also electronic securities and cryptocurrencies that can be offered and traded on their own marketplace.” In other words, banks thus also receive professional support for their blockchain adoption and are able to offer a combination of their traditional range of products and new technology-driven assets – and do so digitally.
One thing is clear for Heinzle: blockchain is more than just hype. “We are already seeing how the technology is creating new opportunities and are convinced that blockchain will be an integral part of the financial sector in the future. Due to the increasingly clear regulatory framework in countries such as Germany and Switzerland, but also at EU level, the foundation has been laid for a thriving digital financial product economy.”
About 21.finance AG
Founded in 2017, 21.finance AG’s “Marketplace as a Service” (MaaS) software solution enables banks, financial intermediaries, and non-financials to create their own marketplace and distribute their products through it. With their own digital and legally compliant online shop for financial products, the fintech’s customers can optimize their sales channels to increase assets under management, reduce operating costs, acquire new customers and ultimately open up new revenue channels. The white label solution gives them access to software and support services to provide a fully digital and regulated investment experience for their investors. Learn more about 21finance at www.21.finance.